Supreme Administrative Court decision on deduction of input VAT by Bulgarian branch of UK company

On 17 September 2018, the Supreme Administrative Court issued its decision concerning an input VAT deduction for a Bulgarian branch involved only in making supplies to its head office in the United Kingdom.

(a) Facts. A UK company performing clinical trials operated through a branch set up in Bulgaria. The branch was involved only in making supplies to its head office and did not make any direct supplies to third parties. The UK company was registered for VAT purposes in Bulgaria through its branch and deducted input VAT on the purchases made by the branch in its Bulgarian VAT return.

The branch had a service agreement with the head office and issued invoices for costs incurred plus a 10% mark-up. In addition, the head office re-invoiced some expenses for which the branch self-assessed and deducted VAT.

(b) Issue. The issue was whether the UK company had a right to deduct input VAT through the Bulgarian VAT return of its branch.

(c) Decision. Based on the above, the Court ruled that the input VAT deduction through the Bulgarian VAT return had to be denied. Instead, refunding of the Bulgarian VAT was possible under the conditions for cross-border EU VAT refunds.

Source: IBFD

---

---